LME Zinc Rallied with Market Sentiment Slightly Repaired

SHANGHAI, Mar 20 (SMM) – Last Friday, UBS agreed to buy Credit Suisse as global regulators sought ways to calm the market turmoil; U.S. Treasury yields tumbled as investors still fretted over liquidity shortages in the banking system despite bailouts for troubled Credit Suisse and First Republic; China's central bank suddenly announced that it would lower the deposit reserve ratio of financial institutions by 0.25 percentage point on March 27, and a new series of supporting policies are on the way after the "Two Sessions" wrapped up; US consumer confidence in March fell for the first time in four months, and the inflation expectations fell to near a two-year low.

LME zinc opened at $2,864/mt last Friday night and closed up $70.5/mt or 2.46% at $2,933/mt. The trading volume was 8,016 lots, and open interest lost 573 lots to 184,000 lots. 上LME inventory declined by 50 mt to 37,725 mt. Despite the small decline, the LME zinc inventory generally showed an upward trend. Last week, the European Central Bank continued to raise interest rates by 50 basis points. Against the background of high interest rates, it is less likely that the overseas zinc demand will continue to strengthen, which suggests that the fundamental support for LME zinc will be limited.

The most-traded SHFE 2305 zinc contract opened at 22,400 yuan/mt last Friday night and rallied to close at 22,350 yuan/mt, up 150 yuan/mt or 0.68%. Trading volume stood at 35,000 lots, and open interest gained by 6,253 lots to 84,318 lots. At present, the domestic zinc smelters are runing at full capacity and plan to maintain so in the next two months. The potential of sufficient supply will provide limited support for zinc prices. On the consumer side, the downstream consumption of zinc has been mediocre in March with no sign of a significant increase. Therefore, the change will mainly occur on the supply side. In a word, the fundamental support for SHFE zinc prices will be constrained.